Small Business America
What you need to know about small business in America including the latest data on job creation, business starts, and more.
In terms of their impact on the economy, small businesses aren’t actually that small. Small businesses is generally defined by the U.S. Small Business Association (SBA) as independent businesses having fewer than 500 employees. Based on SBA's definition, there are 33.2 million small businesses in America, which account for 99.9% of all U.S. firms. Small businesses are credited with just under two-thirds (63%) of the new jobs created from 1995 to 2021 or 17.3 million new jobs. Small businesses represent 97.3% of all exporters and 32.6% of known export value ($413.3 billion). They also employ almost half (46%) of America's private sector workforce and represent 43.5% of gross domestic product. By almost any measure, small businesses are a vital part of the American economy and workforce. Small Business Starts Reach New Highs Entrepreneurship is booming in the U.S. In 2021 alone, a record breaking 5.4 million new business applications were filed, and nearly as many (5.1 million) were filed in 2022.
There are 33.2 million small businesses in America, which combined account for 99.9% of all U.S. businesses.
Small businesses are credited with just under two-thirds (63%) the new jobs created from 1995 to 2021.
In 2021, a record breaking 5.4 million new business applications were filed in the U.S.
New economic needs and changing consumer preferences during the COVID-19 pandemic created more circumstances for new businesses to start. Many individuals turned their ideas and hobbies into a business that could be run from home and the number of e-commerce retailers skyrocketed. Professional and business services was not far behind, as entrepreneurs tapped into the need for personal consulting services. Inflation Bites Amid historically high inflation, many small businesses are struggling to keep up with rising prices. Over the past year, inflation has been the top concern of small businesses by far, according to the MetLife and U.S. Chamber of Commerce Small Business Index. In the latest survey, over half of small businesses said inflation is the top challenge facing the small business community.
Small Business Owners are Working Harder Small business owners report working longer hours than they used to just a few years ago.
Six years ago, 30% of small business said they were working more hours than they were a year ago. In 2022, half (50%) of small business owners said they are working more hours now than they were a year ago. This equates to a very significant 20-percentage point increase in the share of small business owners that report working more hours. One factor that might be contributing to owners working longer hours is the persistent worker shortage. Right now, we have more than 10.8 million open jobs in the U.S., but only 5.9 million unemployed workers. In other words, if every unemployed person in the country found a job, we would still have almost 5 million open jobs. The lack of workers is hitting small businesses across almost every industry: Recently, the National Federation of Independent Business (NFIB) found that almost half (47%) of small business owners reported job openings that were hard to fill.
Strengthening Local Communities
Consumers are increasingly looking to support businesses in their local communities. Small Business Saturday has become a great way to support small business owners in neighborhoods across the country every year around the holidays—but there are many reasons to support local businesses year-round.
At the same time, small businesses are looking to reciprocate the goodwill and give back to their local communities in return. When asked about how they have engaged with their community in the past year, here are small businesses’ most popular answers:
70% have encouraged employees to shop at local small businesses.
66% have donated to local charities over the past year.
64% say they sponsored or donated goods/services to local events.
56% say they offered discounts to certain groups within the community, like teachers or veterans.
What Small Business Owners Need to Know Today
Should We Prepare For A Recession?
A recession could be on the way, or so we've been hearing in the news for the last six months. The US economy is still strong, but rising inflation, falling oil prices, and financial uncertainty all point to a possible decline in the near future. It's also common to worry about making ends meet during a recession, especially if your job security is jeopardized by layoffs. With all that said, you might be wondering, is a recession a good time to start a business?
Will Americans Cease Opportunity? There have been numerous downturns in the US economy over the last few decades, and practically every time one occurs, there is an instant increase in new company applications. When COVID crippled the global economy in early 2020, for example, the US Census Bureau reported a 137 percent surge in new business applications between April and July. The next generation of business owners is clearly not going to sit back and let a recession define their fate. Instead, it could be precisely the push they need to get started on something of their own.
Future Business Owners are "do-ers" Who are Self-Assured and Driven to Succeed. We know there is a new generation of entrepreneurs eager to start their own businesses. But what inspires people to set out on their own? The answer will always differ from person to person, but according to research, it is their "do-it-yourself" attitude that motivates individuals to act: The most common reason employed Americans consider launching a business or side hustle is that they believe they can leverage an existing hobby or skill to generate extra money. That makes sense when preparing for a possible recession because it is critical to ensure you have adequate financial stability to weather any unexpected obstacles. More flexibility and balance are also strong motivators for new entrepreneurs. Americans aren't trying to work less; they simply want greater flexibility in their 9-to-5 jobs so they can devote time to their passion projects. A small business entrepreneur must be creative, resilient, and have a strong desire. It's good to see that the next generation of business leaders share similar characteristics and are eager to go to any length to succeed.
Raising Capital is Tough, but Acquiring Customers is Another Major Challenge.
Novice entrepreneurs are enthusiastic about launching a career in small business ownership, and they are willing to put in the effort required to succeed. However, confidence does not pay the bills. They are aware of the difficulties they will confront as they travel along their path. The lack of financial backing is keeping them from getting started, but selling themselves to clients is the most important area where additional assistance would be required after launch.
Startup costs (27%) and financial risk (21%), according to working Americans, are the two most significant barriers to starting a business in 2023.
Once the company is up and operating, the top areas where respondents expect to require additional assistance are marketing/advertising and creating a website/e-commerce store.
Eight percent of working Americans were so unclear about how to market/advertise their business that they would avoid starting one at all.
Should there be a recession in the horizon, it's natural for prospective business owners to prioritize finances. However, once the business is started, it must continue to recruit new clients in order to stay afloat. The good news is that marketing does not have to be a hassle, nor should it hinder someone from starting a business. There are excellent materials available to teach anyone how to be a marketer, and cutting-edge techniques such as AI, automation, and SMS marketing make it simple to attract and retain customers.
How Entrepreneurs Can Take Advantage of a Recession
The first step in preparing for a recession as a new business owner is to observe how consumers' spending patterns are altering to accommodate the new market conditions. As consumers adapt, there will most likely be market holes that your company can cover. Be adaptable and open to change your offerings to better satisfy their requirements. Another method to succeed is to figure out how to do more with less. Finding efficiency in your organization will help you stay going through a hard economy, whether it's keeping your workforce small or prioritizing your spending to focus on your strongest revenue-driving areas. If you can be creative and seek out the proper tools and resources to be successful during a recession, you’ll be well on your way to growth once the economy bounces back.
Have questions? Contact a Succentrix Business Advisor near you! "Our team is dedicated to keeping small businesses across America financially healthy and strong!"
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Staff, U. S. C. (2023, April 10). The state of Small Business in America. The State of Small Business in America | U.S. Chamber of Commerce. Retrieved May 1, 2023, from https://www.uschamber.com/small-business/state-of-small-business-now